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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Demand for a resource like labor is derived from the demand for the goods produced by the resource






2. 0 < Ei < 1






3. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






4. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






5. Models where firms are competitive rivals seeking to gain at the expense of their rivals






6. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






7. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






8. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






9. The imbalance between limited productive resources and unlimited human wants






10. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






11. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






12. Exists if a producer can produce more of a good than all other producers






13. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






14. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






15. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






16. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






17. Exists if a producer can produce a good at lower opportunity cost than all other producers






18. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






19. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






20. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






21. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






22. Models where firms agree to mutually improve their situation






23. Costs that change with the level of output. If output is zero - so are TVCs.






24. The rational decision maker chooses an action if MB = MC






25. Entry of new firms shifts the cost curves for all firms upward






26. Occurs when LRAC is constant over a variety of plant sizes






27. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






28. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






29. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






30. The additional cost incurred from the consumption of the next unit of a good or a service






31. The marginal utility from consumption of more and more of that item falls over time






32. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






33. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






34. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






35. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






36. When firms focus their resources on production of goods for which they have comparative advantage






37. A good for which higher income increases demand






38. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






39. The additional benefit received from the consumption of the next unit of a good or service






40. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






41. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






42. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






43. Ed = 1






44. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






45. The difference between total revenue and total explicit and implicit costs






46. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






47. The price of a good measured in units of currency






48. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






49. Exists at the point where the quantity supplied equals the quantity demanded






50. Total product divided by labor employed. APL = TPL/L